Council on Foundations - Working with Donorshttp://www.cof.org/resources/working-donors
enFrequently Asked Questions about Fundraising for Community Foundationshttp://www.cof.org/content/frequently-asked-questions-about-fundraising-community-foundations
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p>Raising money for community needs is the central function of community foundations. No surprise, then, that we receive more questions about fundraising than about any other topic. Following are some common inquiries we receive by telephone and e-mail and the replies we give.</p>
<p><strong>Documents for Donors</strong></p>
<p><strong><em>Q: What sort of documentation does the foundation need to provide to donors?</em></strong></p>
<p><strong>A:</strong>When an individual or corporation makes a gift of $250 or more, the foundation must provide a written acknowledgement. This may be a receipt or letter and must include the amount of the contribution (or a description of the gift if it is something other than money) and the value of any goods or services provided in exchange for the gift. If no goods or services are provided, the acknowledgement should state this. In order to claim an income tax charitable deduction, the donor must have this document by either the due date of the tax return that covers the period in which the gift was made or the date on which the tax return is actually filed, whichever is earlier.</p>
<p>If a donor makes a contribution of $75 or more that is part gift and part purchase of goods or services (say, a ticket to a benefit dinner), the charity must provide a receipt that indicates what portion of the contribution covers the fair market value (FMV) of the goods or services provided and what portion may be taken as a charitable contribution.</p>
<p>Contributions of items (other than cash or publicly traded stock) with a value of $500 or more may require the donor to complete IRS Form 8283 (which the community foundation must sign) and submit it with his or her tax return.</p>
<p><strong><em>Q: If we hold a fundraising event and the food and entertainment are donated, do we still need to include the value of these items as goods and services provided?</em></strong></p>
<p><strong>A:</strong>Yes, the FMV of the event is based on the value of goods and services provided, not how much the community foundation paid for them.</p>
<p><strong><em>Q: If we give out T-shirts or key rings with our community foundation's name and logo on them to donors, do we need to include the value of these items as goods and services provided?</em></strong></p>
<p><strong>A:</strong>No, there is an exception in the IRS rules for low-cost articles that are provided to donors in the course of a fundraising campaign. So long as the contribution is $38 or more and the items bear the community foundation's name or logo and cost less than $7.60 (a figure that is adjusted each year), the community foundation need not provide a value for the items, and donors need not reduce their charitable deduction.</p>
<p>Another exception in the IRS rules provides that where the value of the goods or services</p>
<p>provided is less than the lesser of 2 percent of the contribution or $76, the goods and services will be considered to have insubstantial value. The community foundation will not have to provide a value to the donor and the donor will not have to reduce his or her deduction. This exception provides less relief than you might think; after all, 2 percent of a $500 contribution is $10, so any donor thank-you that is more than a coffee mug is likely to fall outside the exception.</p>
<p><strong>Reporting to the IRS</strong></p>
<p><strong><em>Q: How should a community foundation show the revenue and expenses of a fundraising event on its Annual Information Return, Form 990?</em></strong></p>
<p><strong>A:</strong>A community foundation's best resource for this information is its (knowledgeable) accountant, but here are a few points to keep in mind:</p>
<ul><li>The IRS expects to see fundraising expenses on the information returns of public charities and may be curious about the operations of a group that raises lots of money without expending any funds.</li>
<li>A contribution to a fundraising event may generate both revenue and a contribution for the community foundation. Revenue will consist of any payment that covers the FMV of goods and services provided; the contribution will be any amount that exceeds this FMV.</li>
<li>Fundraising expenses are to be broken down in Part II, column D of Form 990.</li>
<li>The IRS requires that public charities provide a schedule that sets forth the gross</li>
</ul><p>receipts, contributions, gross revenue (gross receipts less contributions), direct expenses and net income or loss (gross revenue less direct expenses) of their three largest special events, as measured by gross receipts. The schedule must also summarize figures for all the year's other special events.</p>
<p><strong>Donor-Initiated Fundraising</strong></p>
<p><strong><em>Q: A group of donors would like to hold a golf tournament to raise money for a memorial fund. Can checks be made out to the community foundation?</em></strong></p>
<p><strong>A:</strong>Yes, but there are serious ramifications for the foundation. If a community foundation permits a donor group to use its name and tax exemption, the community foundation may well find itself legally responsible for all aspects of the fundraising event, from providing donors acknowledgements of their contributions to paying vendors if the event does not generate sufficient revenue to cover costs. The community foundation may also be the target of any liability claims that result from the event.</p>
<p>Community foundations that wish to permit what we call donor-initiated fundraising need to ensure that they have policies and procedures in place that allow them to exercise appropriate oversight in connection with these events. Community foundations that do not wish to permit these activities should take steps to inform donor groups that they may not use the community foundation's name or tax exemption for fundraising.</p>
</div></div></div>Mon, 11 Nov 2013 17:21:17 +0000council-webteam1034 at http://www.cof.orghttp://www.cof.org/content/frequently-asked-questions-about-fundraising-community-foundations#commentsWashington Snapshot - July 25, 2014http://www.cof.org/blogs/washington-snapshot/2014-07-25/washington-snapshot-july-25-2014
<div class="field field-name-field-topics field-type-taxonomy-term-reference field-label-hidden"><div class="field-items"><div class="field-item even"><a href="/topic/public-policy" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Public Policy</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p>In this week's Washington Snapshot: </p>
<ul><li>Just Announced: August Recess Toolkit</li>
<li>Recap: House Passes America Gives More Act of 2014</li>
<li>Next Steps on Tax Extenders</li>
<li>Chairman Wyden Restates Commitment to Tax Reform</li>
<li><em>NEW in Snapshot: </em>Trending in Council Legal Affairs</li>
<li>The IRS <em>Can</em> Read Minds: “Gifts” of Real Property</li>
<li>PACE Report on Transparency and Accountability</li>
<li>Upcoming NASCO Conference</li>
<li>Rocky Mountain Tax Seminar</li>
</ul><p>Read all this and more, <a href="http://www.magnetmail.net/actions/email_web_version.cfm?recipient_id=861642883&amp;message_id=5532151&amp;user_id=COF_&amp;group_id=1331006&amp;jobid=20479145">online now</a>!</p>
</div></div></div>Fri, 25 Jul 2014 19:54:29 +0000timothy.huber@cof.org2501 at http://www.cof.orghttp://www.cof.org/blogs/washington-snapshot/2014-07-25/washington-snapshot-july-25-2014#commentsProviding Quality Donor Services to Keep Donors Engagedhttp://www.cof.org/content/providing-quality-donor-services-keep-donors-engaged
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p>Keeping donors interested and excited about their philanthropy is a fundamental task for a community foundation. After all, donors are your best source for additional gifts and larger “legacy” gifts in the future.</p>
<p>Community foundations provide donor services to achieve two main goals: to keep donors engaged (giving) and teach them how to give wisely. Beyond that, donor services can accomplish many smaller goals. Community foundations typically provide these donor services:</p>
<ul><li>Acknowledge and thank donors</li>
<li>Help donors’ ongoing support of and involvement in community issues</li>
<li>Assist donors in leaving a philanthropic legacy for the community’s future benefit</li>
<li>Cultivate long-term relationships</li>
<li>Help donors identify and articulate their charitable interests and goals</li>
<li>Inform donors about their funds, community needs and opportunities, and alternative ways to invest in the community</li>
<li>Encourage donors’ ongoing support of and involvement in community issues</li>
<li>Direct resources to areas of need</li>
</ul><h3>Most donors want to learn…don't they?</h3>
<p>Some donors have not seriously considered developing a giving plan or strategy. They may or may not take advantage of the education and services you offer. Other donors may believe they already have the skills to give their money away. They, too, may not take advantage of your offerings.</p>
<p>It’s important to be able to recognize different donor types, and to ask them what types of assistance they would find helpful. Many donors may say they appreciate the services you provide, even though they don’t take advantage of them. It can be disappointing to plan an event in which no one shows up, but you can't force feed donors if they aren’t hungry. When it comes to donor services, sometimes less may be more.</p>
<h3>What do donors want to learn?</h3>
<p>The community foundation has the opportunity to inform donors about many areas, including current needs in the community, trends, and emerging issues. In general, most of the educational content falls into one of three categories:</p>
<ul><li>Why give: motivations behind giving; mission and values statements</li>
<li>How to give: grantmaking guidelines, strategies, and opportunities</li>
<li>How to get the family involved in giving: succession planning</li>
</ul><p>The most popular programs seem to involve succession and other legacy planning issues. Community foundations offer donors information about philanthropy and passing charitable values on to the next generation. They might offer family meetings or workshops to teach the donor how to involve his children in charitable efforts. Foundation staff might also discuss how to determine philanthropic priorities, monitor the effectiveness of grants, and work together as a family to address community needs.</p>
<h3>How do donors want to learn?</h3>
<h4>What Donors Want</h4>
<p>“Our donor survey found that donors wanted efficiency, excellent due diligence, notification of special giving opportunities, and one-on-one meetings, should they request it. They did not want time-consuming, public, and expensive visits and environmentally unsound paper mailings.”—<em>Marin Community Foundation</em></p>
<p>So you’ve found some donors who seek education. Now it’s time to get planning. Keep these points in mind:</p>
<ul><li>Donor-education programs must accommodate a variety of learning styles and formats. Program styles can vary widely, including one-on-one consulting, hands-on work with charities, workshops, and seminars.</li>
<li>Adults often learn best in realistic settings where they can apply what they’ve learned. For philanthropy education, this might involve donors taking part in visits to a nonprofit’s headquarters or programs, volunteering with a nonprofit group, or participating in a grant decision process.</li>
<li>Some surveys have shown that donors tend to prefer educational settings that encourage interaction with other donors. This might account for the rapid spread of giving circles, in which small groups pool their resources; learn together about philanthropy; and make small grants locally, nationally, or internationally.</li>
<li>Many community foundations invite donors to their offices for programs. However, you might also consider holding presentations in other places where donors or potential donors live, meet, and socialize—such as country clubs, retirement communities, schools, libraries, professional associations, alumni gatherings, and houses of worship.</li>
</ul><h3>What activities can we offer to educate and engage donors?</h3>
<p>The range of activities to serve donors is broad and varies from foundation to foundation, depending on mission, staff, and budget. Here is a list to spark some ideas:</p>
<ul><li>Meet with new donors, giving them a welcome packet of information about the foundation and fund.</li>
<li>Ask donors to complete a donor intake form, which asks them to identify areas of interest and whether and how they want to be contacted by the foundation.</li>
<li>Offer donors information about philanthropy and passing charitable values on to the next generation.</li>
<li>Offer workshops on how to conduct a site visit or how to decide whether to recommend a grant for general operating or program-specific support.</li>
<li>Inform donors about trends, emerging issues, current needs, and opportunities through a newsletter, bulletin, e-mail, or website.</li>
<li>Schedule bus tours to grantee organizations.</li>
<li>Host breakfast or luncheon meetings featuring speakers or panels.</li>
<li>Hold large symposiums on community issues.</li>
<li>Formally recognize donors (unless they wish to remain anonymous) to express appreciation for their generosity.</li>
<li>Sponsor giving circles (also called collaborative donor networks) in which individuals pool resources to support a common interest or cause.</li>
<li>Invite donors to join an advisory committee, hear presentations by grantees, or participate in a leadership opportunity.</li>
</ul><p>Track donor interest over time through a survey or questionnaire. Follow up with donors either in a focus group setting or in one-on-one meetings or calls. You can also track donor interest by frequently reviewing the grants they make from advised funds.</p>
<p>Keep in mind that not all of the activities suggested here will be right for your foundation. You may want to focus on one or two, and save a few others for later. Think <em>quality</em> in the services you offer, not quantity.</p>
<h3>What's the minimum service we should offer donors?</h3>
<p>If you do nothing else, give new donors an orientation to the foundation and their fund. There are many tools community foundations can use when orienting donors. Some of the most common are:</p>
<ul><li>A welcome letter as soon as the fund is established</li>
<li>A donor intake form, which helps donors write their mission and values statements</li>
<li>A personalized handbook with easy-to-understand information about the fund type, the foundation, the guidelines, and procedures (see below)</li>
<li>A “fundamentals of philanthropy” workshop</li>
<li>A follow-up call and/or an in-person meeting (depending on the size of the fund) to find out how you can help and what services they’re interested in. Ask them: If we come across opportunities that might interest you, would you like us to let you know? If so, how?</li>
</ul><h3>What should a donor handbook include?</h3>
<p>Donor handbooks provide donors with information about their funds. Handbooks can be invaluable for new donors who are just getting oriented to the foundation and philanthropy. You might consider including:</p>
<ul><li>A personalized welcome note from the president and CEO.</li>
<li>A brief history of the foundation.</li>
<li>A list of grantmaking opportunities.</li>
<li>The foundation’s policies and guidelines. These guidelines give instructions for making grant requests; explain the foundation’s procedures for processing, approving, and distributing those requests; and describe the foundation’s other services.</li>
</ul><p>Some community foundations offer a formal, bound version of the donor handbook, designed as a keepsake. Others present more functional handbooks, in folders or loose-leaf binders so that the materials can be updated as needed. For a sample donor handbook, visit <a href="http://www.cfgrb.org/" target="_blank">www.cfgrb.org</a></p>
<h3>What are fund statements, and how often should we send them?</h3>
<p>Fund statements provide donors with information about the status of their charitable funds. They are also a good way to maintain relations with donors and update them on foundation activities and community needs. To comply with the National Standards, you should send donors at least one fund statement per year. Different community foundations present fund statements in many different ways, such as in a letter or newsletter, as part of the foundation’s annual report, or online.</p>
<h3>What services can we provide to involve the "next generation"?</h3>
<p>Both the community foundation and the donor have an interest in involving future generations in philanthropy. Here are some ideas for involving the next generation(s):</p>
<ul><li>Help donors create a fund mission statement with their family. This will get all the members of the family involved and help to focus their giving.</li>
<li>Offer to help the family do its grantmaking. You might facilitate meetings with families to help them talk about their values and make decisions about funding, or schedule site visits with families and children.</li>
<li>Get young people involved in philanthropy. The Community Foundation of Boulder County assembled a team of high school students to distribute $10,000 to local nonprofits.</li>
<li>Inform donors about your reading and Web resource list, particularly those that educate children about giving and philanthropy. (Check out the Council’s <em>The Giving Family</em> if you haven’t already).</li>
<li>Encourage the donor and his family to volunteer their time. Offer them suggestions on how they can do so.</li>
</ul><p>Some community foundations permit the donor to name grandchildren or expected future generations as subsequent advisers to a donor-advised fund. Other foundations limit donor involvement to two generations.</p>
<h3>What services can we provide for donors looking to give smaller amounts?</h3>
<p>Some foundations sponsor giving circles (also called collaborative donor networks) in which individuals pools resources to support a common interest or cause. These groups appeal to philanthropic individuals who may want to “test out” the community foundation, who want to learn about philanthropy but are not ready to start their own fund, or who want to work with others on a specific community issue.</p>
<p>Other community foundations offer fund-builders programs (sometimes called acorn funds) in which the donor may start a fund with a modest gift and build the fund over time.</p>
<h3>How can we measure the success of our donor services efforts?</h3>
<p>This is a tough one. After all, who knows what <em>really</em> makes donors contribute more over time? Here are some ways to gather information:</p>
<ul><li>Survey donors on specific services and general feelings about the foundation.</li>
<li>Track gifts to existing funds. You might use giving data from the last five years to set a goal for the next year.</li>
<li>Track what dollars from donor-advised funds were influenced by your input—that is, any time you moved a donor to action. This tends to be subjective.</li>
</ul><p>According to one of your colleagues, you can really only measure donor services on an individual basis: “Donor services are all about one-on-one relationships. The goal should be that every donor-advised fund has a personal management plan. For the majority of funds, the plan will be: ‘You need to do nothing.’ It all comes down to customized work—making one-on-one contact from the top down, the highest fund down to the lowest.”—Minnesota Community Foundation</p>
<h2>Donor Services: Ideas from the Field</h2>
<h3>Continually update donors on new grant opportunities</h3>
<p>Marin Community Foundation’s (MCF) website features a tool for donors called MCF Donor Express that every month spotlights approximately 10 organizations working in a particular issue area. MCF Donor Express outlines each organization’s mission and includes a wish list for funding to a maximum of $10,000. MCF solicits information from the nonprofits and performs due diligence before posting their information. “The program has been popular…It serves to offer the donors, who generally like to remain anonymous, a more private service,” says an MCF staffer.</p>
<h3>Hold a variety of donor events</h3>
<p>The Boston Foundation established three types of events: 1) Tips and Tools Programs, where the foundation asks top-level donors how to better help them achieve their philanthropic goals; 2) Donor Briefings, held three times a year on a specific grantmaking topic (such as education or homelessness), showing how the foundation is involved with community initiatives that can be supported by foundation donors; and 3) Around the Boardroom Table, at which the community foundation invites donors and other local funders to formal but intimate boardroom-style meetings in hopes of cultivating coinvestment in applicant organizations.</p>
<h3>Convene the community</h3>
<p>Kalamazoo Community Foundation holds an annual community breakfast meeting that serves as a public platform from which to inform the community about the foundation and its accomplishments. The meeting agenda includes a presentation by the president and CEO of the foundation and a featured keynote speaker who presents model community programs to energize and motivate those in attendance. The meeting is free of charge since it is underwritten by several local sponsors. It usually attracts 500–700 business, community, and nonprofit leaders and interested citizens.</p>
</div></div></div>Sat, 16 Nov 2013 20:25:08 +0000council-webteam1126 at http://www.cof.orghttp://www.cof.org/content/providing-quality-donor-services-keep-donors-engaged#commentsContributions of Fractional Interests in Tangible Personal Propertyhttp://www.cof.org/content/contributions-fractional-interests-tangible-personal-property
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p>The Pension Protection Act of 2006 (PPA) imposes requirements for determining the charitable deduction permitted for gifts of fractional interests in tangible personal property. </p>
<h3>What contributions are affected?</h3>
<p>These requirements apply to contributions made after August 17, 2006.</p>
<h3>What is tangible personal property?</h3>
<p>In <a href="http://www.irs.gov/pub/irs-pdf/p526.pdf" target="_blank">IRS Publication 526, Charitable Contributions</a>, tangible personal property is defined as “any property, other than land or buildings, that can be seen or touched.” Examples of tangible personal property include furniture, books, jewelry, and artwork.</p>
<h3>What is a fractional interest in tangible personal property?</h3>
<p>While many donors will contribute property outright, occasionally a donor will want to contribute property but retain some rights to the property. A fractional interest is a portion of the donor’s entire rights to the property. For example, a donor may contribute a 25% interest in a painting or coin collection to a museum, giving the museum the right to possess and control the item for three months of each year.</p>
<h3>Is a donor permitted to receive a deduction for contribution of a fractional interest in property if the donor doesn’t own all of the interest in the property?</h3>
<p>No, unless an exception is made by the Treasury Secretary. Generally, if the donor shares the property with another individual or entity (other than the charity to which the fractional interest is to be donated) a deduction will not be permitted. The PPA permits the Secretary to make an exception to the rule if every person with an interest in the property makes a proportional contribution of that person’s own interest.</p>
<h3>What happens if the charity does not take substantial physical possession of the property or doesn’t use the property for an exempt purpose during the period of time ending with the death of the donor or ten years after the initial contribution?</h3>
<p>The donee’s income and gift tax charitable deduction for all contributions of interests in the property will be recaptured plus interest. The donor will also be subject to an additional tax of 10 percent of the amount recaptured.</p>
<h3>What is the value of a charitable deduction for the initial contribution of a fractional interest?</h3>
<p>The PPA does not change the charitable deduction for the initial contribution. If the donor contributes the property to a charity that will use the property for its charitable purpose, the donor will likely receive a deduction equivalent to the fair market value of the interest it contributed. </p>
<h3>What charitable deduction is permitted for subsequent contributions of interests in the same property?</h3>
<p>The charitable deduction permitted under income, gift, or estate tax rules for additional contributions of interests in the same property is limited to the lesser of the following:</p>
<ul><li>The value used when determining the deduction available for the initial contribution</li>
<li>The fair market value of the item at the time of the subsequent contribution</li>
</ul><h3>Does a donor eventually have to contribute all interests in the property?</h3>
<p>Yes. A donor’s income tax or gift tax charitable deduction(s) related to the gifts of fractional interest of particular property will be “recaptured” if a donor does not contribute all of the donor’s interest in the property before the earlier of the donor’s death or ten years after the initial contribution. Interest on the recaptured amount will also be due. The donor will also be subject to an additional tax of 10 percent of the amount recaptured.</p>
<h3>What happens if the charity to which the initial contribution was made ceases to exist?</h3>
<p>The contribution of any remaining fractional interests may be contributed to another organization described in Section 170(c). Section 170(c) organizations include charities, government, certain veterans' organizations, fraternal societies, and cemetery corporations. </p>
<h3>How are these rules applied if a donor made a contribution of a fractional interest prior to or on August 17, 2006?</h3>
<p>These provisions of the PPA do not apply to contributions made prior to or on August 17, 2006. If a donor makes an additional contribution of a fractional interest in the same property after August 17, 2006, the additional contribution will be treated as the first fractional contribution for the purposes of the provisions described above. For example, if an individual contributed 25% of her interest in a painting to a museum in 2005 and makes a subsequent contribution of 25% interest in September 2006, the contribution in September 2006 will be treated as the first fractional contribution. </p>
<hr /><h4>Disclaimer</h4>
<p>The information provided in this resource is based on our continuing analysis of the Pension Protection Act. Every effort has been made to ensure the accuracy of this information. Due to the complexity of the PPA and the fact that many of these provisions introduce issues that are new to the Internal Revenue Code, this information is subject to change. Please check back here and on the IRS website (<a href="http://www.irs.gov">www.irs.gov</a>) for updates. This information is not a substitute for expert legal, tax, or other professional advice and we strongly encourage grantmakers and donors to work with their counsel to determine the impact of the PPA and related guidance on their particular situations. This information may not be relied upon for the purposes of avoiding any penalties that may be imposed under the Internal Revenue Code.</p>
</div></div></div>Mon, 11 Nov 2013 23:34:19 +0000council-webteam1066 at http://www.cof.orghttp://www.cof.org/content/contributions-fractional-interests-tangible-personal-property#commentsCreating a Donor-Initiated Fundraising Policyhttp://www.cof.org/content/creating-donor-initiated-fundraising-policy
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p>Community foundations are often faced with requests from donors or local volunteers who wish to express their support by raising money for the community foundation or for a particular fund. Allowing individuals or a group of volunteers to engage in fundraising activities on behalf of the community foundation (a practice called donor-initiated fundraising) can be a great way to increase foundation assets and boost name recognition in the community. However, this approach to fundraising also comes with risks. The community foundation is delegating its authority to individuals or groups who are neither staff nor board members of the community foundation. Before allowing others to fundraise on the foundation’s behalf, foundations should understand the key issues and create a strong policy to guide fundraising activities. The fundraising policy should be carefully explained to potential donor-fundraisers before fundraising begins.</p>
<p><strong>A strong policy should include the following: </strong></p>
<ol><li>
<p><strong>An advance approval process.</strong></p>
<p> Some fundraising ideas can be enticing. However, if they are brought to the foundation at the last minute, they may not be well-planned or thought through, leaving the foundation open to possible risk.</p>
<p> <strong>Thoughts to consider:</strong></p>
<ul><li>How far in advance must the donor-fundraiser request approval?</li>
<li>To whom at the foundation should the request be submitted?</li>
<li>What information is required (e.g., description, budget, anticipated income)?</li>
</ul></li>
<li>
<p><strong>Types of prohibited fundraising activities (if any). </strong></p>
<p> Certain kinds of events (e.g. auctions, gambling) can trigger liability concerns, IRS reporting, or compliance with state rules.</p>
<p> <strong>Thoughts to consider:</strong></p>
<ul><li>Will you allow <a href="http://www.cof.org/content/conducting-raffle-fundraiser">raffles</a>? Dinner parties? Casino nights?</li>
<li>Will you permit events that use professional fundraisers or event companies?</li>
</ul></li>
<li>
<p><strong>Scope of authority.</strong></p>
<p> In planning a fundraiser, things can happen so quickly that the donor has obligated the foundation to vendors without fully meaning to do so.</p>
<p> <strong>Thoughts to consider:</strong></p>
<ul><li>Who has the authority to enter into any contracts?</li>
<li>In what ways can you manage donors as they plan the event? Can they make reservations, pay deposits, or verbally commit the foundation?</li>
</ul></li>
<li>
<p><strong>Protection from liability exposure. </strong></p>
<p> In planning special events, no one plans to get sick or injured, but the foundation can be prepared by planning for the worst.</p>
<p> <strong>Thoughts to consider:</strong></p>
<ul><li>Will additional insurance be required for the activity? If so, how will it be handled?</li>
<li>Will special waivers need to be signed by guests before participating in a risky activity (e.g. relays, bike events)?</li>
</ul></li>
<li>
<p><strong>A plan for public relations</strong>.</p>
<p> The foundation works hard at building its reputation within the community, so any use of its name should display the foundation in the best possible light.</p>
<p> <strong>Thoughts to consider:</strong></p>
<ul><li>What is the approval process for use of the community foundation’s name?</li>
<li>Who is the spokesperson for the event and/or the community foundation?</li>
<li>Will the foundation need to review any social media or other promotional activities?</li>
</ul></li>
<li>
<p><strong>A feasible method for handling expenses. </strong></p>
<p> Strict <a href="http://www.cof.org/content/taxable-distributions-donor-advised-funds">IRS rules</a> prevent certain kinds of payments from funds, which can affect how the foundation handles its reimbursements.</p>
<p> <strong>Thoughts to consider:</strong></p>
<ul><li>How will payment or reimbursement of expenses be handled in light of <a href="http://www.cof.org/content/taxable-distributions-donor-advised-funds">donor-advised fund rules</a>?</li>
<li><a href="http://www.cof.org/content/taxable-distributions-donor-advised-funds">Donor-Advised Fund</a> Reminders:
<ul><li>No grants, loans, compensation, or similar payments (including expense reimbursements) may be made to donors, advisers, or related parties.</li>
<li>No payments to individuals.</li>
<li>Unclear if payments directly to vendors require expenditure responsibility.</li>
</ul></li>
</ul><p>See <a href="http://www.cof.org/content/taxable-distributions-donor-advised-funds">Taxable Distributions for Donor-Advised Funds</a> for more details.</p>
<p> <strong><em>TIP</em></strong>: Foundations may consider providing donors a receipt for tax purposes acknowledging the amount of the out-of-pocket expense, for potential deduction by the donor as a charitable expense.</p>
</li>
<li>
<p><strong>A clear solution for handling contributions. </strong></p>
<p> If the fundraiser is successful, contributions will come pouring in and the foundation will need to be ready.</p>
<p> <strong>Thoughts to consider:</strong></p>
<ul><li>Who is responsible for communicating state charitable solicitation disclosure requirements (if any)? Do state charitable solicitation rules permit nonemployees to solicit, or handle, the funds? Consult <a href="http://www.irs.gov/Charities-&amp;-Non-Profits/Charitable-Organizations/Charitable-Solicitation---State-Requirements">IRS guidance for state charitable solicitation</a> or your state government’s website for more on state solicitation rules.</li>
<li>How will contributions of cash and checks be handled?</li>
<li>Are contributions by credit card permitted? Consider best practices for managing credit card information.</li>
<li>How will <a href="http://www.cof.org/content/substantiating-contributions-donor-advised-funds">gift acknowledgments</a> be handled? Consult <a href="http://www.irs.gov/pub/irs-pdf/p1771.pdf">IRS Publication 1771</a> for more on gift acknowledgment rules.</li>
</ul><p>Note that if the foundation decides to prohibit donor-initiated fundraising, crafting a policy that clearly communicates this position is important.</p>
<p> When crafting a new policy, a community foundation should work with its experienced local legal counsel to ensure that the policy meets the specific needs of the community foundation and any applicable local rules.</p>
</li>
</ol></div></div></div>Mon, 11 Nov 2013 19:34:37 +0000council-webteam1039 at http://www.cof.orghttp://www.cof.org/content/creating-donor-initiated-fundraising-policy#commentsGifts of Tangible Personal Propertyhttp://www.cof.org/content/gifts-tangible-personal-property
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p><em>A donor is considering starting a fund at the community foundation using a piece of jewelry instead of a cash gift. The jewelry cost her $1,000 (35 years ago) and is now worth $20,000. May the community foundation accept the gift? What documentation must the community foundation prepare? From the donor’s perspective, how does a gift of tangible personal property differ from a gift of cash or securities? </em></p>
<h3>Definition</h3>
<p>A quick definition of the term is anything, other than land, that can be touched. For a more exact definition, it may be easier to say what is not tangible personal property: real estate and improvements to real estate are not considered tangible personal property, nor is money, including stocks, bonds, options and other negotiable instruments. Patents, trademarks, and copyrights, while personal property, are not tangible. Thus, items such as art, antiques, jewelry, stamp collections, automobiles and even animals are tangible personal property.</p>
<h3>Acceptance</h3>
<p>It is legal for the community foundation to receive gifts of appreciated personal property, but that does not mean the foundation should accept all offered items. Some gifts are of no use to the foundation and may be difficult and time-consuming to sell. Others may present transportation, insurance, storage and preservation problems. Before accepting any gift, check your foundation’s gift accept­ance policy to see if it offers any guidance.</p>
<h3>Documenation</h3>
<p>As with all contributions over $250, the community foundation must provide the donor with a written acknowledgement of the gift. The receipt should describe the item but should not assign a value. It is the donor, and not the community foundation, who is responsible for determining and substantiating the value of the gift.</p>
<p>Ordinarily, a donor must file Form 8283 with the IRS if she gives property with a total value of more than $500 to one or more charities. If the value of a single item (or collection of similar items) exceeds $5,000, the donor must also get a <em>qualified apprais­al</em>—a valuation prepared and signed by a qualified, independent appraiser—and file an appraisal summa­ry on Form 8283. This summary must be signed by the community foundation. If the community founda­tion later sells or otherwise disposes of property worth $500 or more within two years after receiving the gift, the community foundation must report that transfer to the IRS on Form 8282 within 125 days.</p>
<h3>Income Tax Deduction</h3>
<p>While foundationstaff should never give tax advice to donors (refer <strong>2004 </strong>them to their tax advisor instead), it can be helpful to <strong>3 </strong>understand how a gift of tangible personal property will affect the donor’s income tax liability. The value that the donor will be able to use as the basis for her income tax deduction depends on how the community foundation uses the property. If the foundation’s use of the property is <em>related </em>to its charitable purposes, the donor may use the fair market value of the prop­erty (here, $20,000) in calculating her deduction.</p>
<p>Examples of property put to a related use would be art displayed at a public museum or books given to a library. The fact that proceeds from the sale will be used to fund foundation activities is not enough for the use to be considered related. A gift of jewelry to a community foundation is virtually certain to be con­sidered unrelated to the foundation’s charitable pur­poses. If the use of the property is unrelated, as in this case, the donor’s deduction is limited to the cost basis of the property. Generally, basis is what the donor paid for the property—here, $1,000.</p>
<p>Once the donor has determined what value to use, she can figure the maximum deduction allowed for that year. The deduction for a gift of related-use prop­erty where the donor uses fair market value is limited to 30 percent of the donor’s adjusted gross income (AGI). If the value of the donation is calculated using basis (unrelated use), however, the donor may claim a deduction up to 50 percent of her AGI. In either case, any excess that cannot be applied in the current year can be carried forward and applied to future tax years for up to five years. By comparison, gifts of cash and most securities are deductible at fair market value and up to 50 percent of AGI with no related-use issue.</p>
<h3>Other Factors</h3>
<p>In addition to the issue of whether or not the foundation will put the property to a related use, other factors, including how long the donor owned the property, whether the property is capital gain property or ordinary income property, and whether the property has increased or decreased in value may affect both the value and amount of the deduction allowed. In some cases, the donor may be able to choose between different calculations for the best tax result. For these reasons, the donor should always be encouraged to consult with her tax advisor to determine the tax implications of a gift of tangible personal property.</p>
</div></div></div>Mon, 11 Nov 2013 17:36:56 +0000council-webteam1036 at http://www.cof.orghttp://www.cof.org/content/gifts-tangible-personal-property#commentsAccepting Non-Cash Gifts as Charitable Contributionshttp://www.cof.org/content/accepting-non-cash-gifts-charitable-contributions
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p>Accepting gifts of real estate, subchapter S corporations, and business interests (including general partnerships, limited partnerships, limited liability partnerships, and limited liability companies). As well as, determining when or if they trigger unrealted business tax (UBIT).</p>
</div></div></div><div class="field field-name-field-document-attachment field-type-file field-label-hidden"><div class="field-items"><div class="field-item even"><span class="file"><img class="file-icon" alt="" title="application/pdf" src="/modules/file/icons/application-pdf.png" /> <a href="http://www.cof.org/sites/default/files/documents/files/Issues-Posed-by-Types-of-Charitable-Contributions.pdf" type="application/pdf; length=129222" title="Issues-Posed-by-Types-of-Charitable-Contributions.pdf">Accepting Non-Cash Gifts as Charitable Contributions</a></span></div></div></div>Mon, 11 Nov 2013 17:15:52 +0000council-webteam1033 at http://www.cof.orghttp://www.cof.org/content/accepting-non-cash-gifts-charitable-contributions#commentsDonor Advised Fund Gift to a 501(c)(3) Donorhttp://www.cof.org/content/donor-advised-fund-gift-501c3-donor
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><h3>Can a 501(c)(3) organization with a donor advised fund at a community foundation make a distribution to itself?</h3>
<p>Unfortunately, when the law changed under the Pension Protection Act of 2006, this was left unclear. <a href="http://www.cof.org/templates/content5.cfm?ItemNumber=18617&amp;navItemNumber=17789">Intermediate sanctions rules</a> prohibit grants and similar payments to donors from a donor advised fund, and charitable organizations are not excluded from the definition of donor. We do not believe that this rule was intended to apply when the donor is a 501(c)(3) public charity or a government agency, but the law does not currently make them exempt. </p>
<p> Depending on the circumstances, there may be a couple of options. One option is to have the fund make distributions only to the public charity. A fund that distributes to a single organization is excluded from the definition of a donor advised fund. However, this means that the charity will have to do its own grantmaking. Conversely, the fund could be one that only makes grants to organizations other than the charity donor. Finally, the donor charity could create two funds – one that would make distributions only to it, while the second would be used for grants to others.</p>
<p> Generally, if the charity is not the only donor, and the fund has multiple donors, the fund may not meet the <a href="http://www.cof.org/templates/content5.cfm?ItemNumber=18577&amp;navItemNumber=17789">legal definition of a donor advised fund</a> at all. In that case, the fund could make grants to the charity donor as well as to other organizations.</p>
<p><em>Last revised November 2012.</em></p>
</div></div></div>Sun, 10 Nov 2013 17:27:42 +0000council-webteam1017 at http://www.cof.orghttp://www.cof.org/content/donor-advised-fund-gift-501c3-donor#commentsWorking with a Donor's Investment Manager http://www.cof.org/content/working-donors-investment-manager
<div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><p>“If I create a fund at the community foundation, can my investment manager still manage the funds?” You may have already come across a donor that asked this question. Such a donor is essentially requesting that the fund they create be invested outside of the foundation’s investment pool(s). While there are cases where the answer must be “no” (e.g., donor wants the investment firm she owns to manage the assets), there are also cases where the answer should be “no.” A strong policy will guide the community foundation in those cases where the answer may be “yes.”</p>
<p><strong>Background</strong></p>
<p>There is no legal precedent for community foundations permitting such arrangements. In at least one private letter ruling, the IRS has permitted a community foundation to establish multiple investment pools and allow a donor to choose among those pools. However, no similar rulings have been issued that permit a donor to recommend an investment manager. While the absence of such guidance, does not mean an arrangement is prohibited, it is a cause for caution. In particular, permitting a donor to recommend an investment manager needs to be clearly structured in a manner which does not permit the donor to control the investments of contributed funds.</p>
<p>Beyond IRS concerns about donor control, community foundations should also take their obligations under relevant prudent investor standards into account. For the majority of community foundations that are now subject to the <a href="http://www.upmifa.org/"><strong>Uniform Prudent Management of Institutional Funds Act</strong></a> (UPMIFA), consideration must be given to the explicit duty to minimize investment costs found in Section 3(c) of UPMIFA. An investment manager recommended by the donor who charges more than managers of pooled assets or an increase in investment costs of pooled investments because the community foundation is permitting donor recommend investment managers are both concerns to take into account under UPMIFA. In addition, whether the community foundation is subject to UPMIFA, its predecessor, the Uniform Management of Institutional Funds Act (UMIFA), or the Uniform Prudent Investor Act (UPIA), the community foundation and its investment committee needs to consider how many managers the investment committee can adequately supervise.</p>
<p><strong>Creating a Policy </strong></p>
<p>In light of the considerations above, some community foundations may choose to prohibit the practice of allowing donors to recommend investment managers. If, however, the community foundation chooses to permit the practice, a policy is critical. The key elements to any such policy that permits donors to recommend investment managers are:</p>
<p><strong>1. Review of investment manager</strong>. Prior to accepting an investment manager recommended by a donor, the board or investment committee needs to review that investment manager’s performance, fees, and credentials just as it would for any other investment adviser. This due diligence process should provide enough information to determine if the investment manager meets the foundation's requirements. The Council's <a href="http://www.cof.org/content/recommended-best-practices-managing-foundation-investments"><strong>Recommended Best Practices in Managing Foundation Investments</strong></a> and <a href="http://www.cof.org/content/investment-management-practice-tips-and-resources"><strong>Investment Management Practice Tips and Resources</strong></a> contain guidance and resources on such processes.</p>
<p>If the community foundation decides to engage the recommended investment manager, the community foundation board or investment committee needs to periodically assessment performance of the manager against its established benchmarks.</p>
<p><strong>2.</strong><strong>Establish Direct Relationship with Community Foundation</strong>. While the donor may have recommended the investment manager, the agreement with the manager must be between the community foundation and the manager. The community foundation would make any investment decisions. In other words, the donor has no continuing role in the relationship and should have no ability to instruct the manager or obtain information directly from the manager with regard to the funds contributed to the community foundation. Similarly, the community foundation board or investment committee must retainthe right to terminate the relationship with the manager.</p>
<p><strong>3. Restrictions on Investment Manager</strong>. The donor, donor advisors to donor advised funds and parties related to donors or donor advisors should not be permitted to serve as investment managers. The term “related parties” generally includes family members and entities where donor or donor advisors hold 35control over the voting power or profit interest.</p>
<p>In the case of a donor advised fund, donors, donor advisors and related parties are <strong>strictly prohibited</strong> from receiving compensation or benefits from the donor advised fund. This would preclude most arrangements between the community foundation andthose individuals or entities. However, even if such an investment manager were willing to forgo fees for the services, you may find that what may appear to be a pro bono relationship on its face may confer a benefit to the investment manager (e.g., underlying soft dollar or other relationships between the investment manager and third parties, or volume discounts).</p>
<p>Even if there is no financial benefit to the investment manager or the fund is not a donor advised fund, the continuing role of the donor, donor advisor or related party as investment manager couldbe viewed as impermissible continuing donor control over the fund and should be avoided. The importance of not allowing the donor to direct or control the investments or investment manager is underscored by the case The Fund for Anonymous Gifts v. the IRS, 79 AFTR2d Par. 97874 (D.D.C. 1997). In that case, the U.S. District Court for the District of Columbia considered the difference between allowing donors to choose among investment pools and allowing them to control investment decisions. The court reasoned that the provision of the charity’s governing instruments which permitted donors to direct investments after their contribution to the charity was too much donor control. The opinion contrasted the situation where the charity controlled the pools and the donor was only are permitted to allocate the contribution among investment pools established by the charity. Note that The Fund for Anonymous Gifts was later granted status as a charity after it amended its governing instruments to eliminate donor control over gifts (83 AFTR2d Par. 99654 (D.C. Cir. 1999)).</p>
<p>Finally, in the event the donor is not an investment professional and asks to provide direction on the investment of his/her gifts, a community foundation should also consider that allowing the donor to provide direction about investment of assets that are no longer owned by the donor may put the donor in violation of securities laws.</p>
<p>For all of these reasons, a policy should prohibit the donor, donor advisors to donor advised funds and parties related to donors or donor advisors from serving as investment managers of the nonpooled assets of the particular fund.</p>
<p><strong>4.</strong><strong>Fund Minimum</strong>. From a practical angle, consider what size the fund would need to be for the community foundation to consider vetting and potentially hiring an investment manager recommended by the donor. Remember, since these funds would be managed outside your pool, every donor’s recommendation that you consider will mean an additional manager to vet and, if hired, monitor, meet with and periodically review. For this reason, and in light of the prudent investor standards under state laws discussed above, take into account the capacity of staff, investment committee and board to prudently manage, evaluate and monitor additional investment managers when considering the policy and fund minimums.</p>
<p>Working with an investment manager recommended by a donor may have its benefits. It exposes the community foundation to a new manager and eliminates one more hesitation a donor may have about making a significant contribution. However, such arrangements need to be handled carefully because, ultimately, the community foundation has fiduciary duties with respect to all its assets regardless of who is managing them.</p>
</div></div></div>Thu, 07 Nov 2013 22:33:23 +0000council-webteam929 at http://www.cof.orghttp://www.cof.org/content/working-donors-investment-manager#comments